Netherlands amends tax treaty with Germany for cross-border workers

The tax treaty between the Netherlands and Germany is being amended so that cross-border workers can work from home for a maximum of 34 days a year without having to pay taxes on their income in both countries. This has been agreed upon by the countries today. It is a first step to improve the possibilities for cross-border workers to work from home. Since a maximum of 34 days per year has been included, not all cross-border workers benefit from the new home working arrangement. Therefore, the Netherlands and Germany have agreed to discuss this further.

A tax treaty prevents cross-border workers from paying taxes on the same income in both the country of residence and the country where the employer is located. Generally, it is arranged that income tax is levied in the country where the work is physically performed. If cross-border workers work from a different country than where the employer is located, then taxing rights can also be granted to that other country. For example, taxes must be paid in both the country of residence for the part that is worked from home, and in the country of the employer for the remaining part of the income.

Home Working Arrangement

With the amendment of the tax treaty with Germany, cross-border workers can work from home for a maximum of 34 days a year, during which the taxing right remains entirely with the country where the employer is located. This applies to both employees in the private sector and in the public sector.

The amendment of the tax treaty has various advantages for cross-border workers. The income of the cross-border worker is only taxed in the country of the employer, reducing uncertainty about the final net income. Additionally, extra administrative burdens can also be avoided, for example, for making complex calculations for tax returns in both countries. In some cases, it can prevent costs from being incurred for a tax advisor.

It has been agreed with Germany that a home working day is considered to be more than 30 minutes of work from home per day. The amendment of the tax treaty is a first step to improve the situation regarding home working for cross-border workers.

Letter of Intent

Not all cross-border workers benefit from the new home working arrangement. For example, people who have an employer in Germany and regularly work from home 1 to 2 days a week. The Netherlands also wants to find a solution for them, and therefore a letter of intent has been signed together with Germany, agreeing to discuss a home working arrangement with more than 34 working days per calendar year in the future. Both countries also want to provide more certainty to employers regarding the tax implications of home working by cross-border workers, where possible.

Next Steps

Before the amendment of the tax treaty comes into effect, the treaty will first be submitted to the Council of State, after which it will be sent to Parliament for approval. The German parliament must also agree to the amendment.